Wen | Qian Boyan
April 29, the National Development and Reform Commission, the Ministry of Science and Technology, the Ministry of Industry and Information Technology and other 11 ministries and commissions jointly issued the "notice on stabilizing and expanding automobile consumption of a number of measures," which includes adjusting the implementation requirements of the National VI emission standards, improve the purchase of new energy vehicles financial and tax support to speed up the elimination of the old diesel trucks, the smooth circulation of second-hand car trading, encouraging automobile Consumer credit financial business and other five aspects of the car market stimulus policy.
When China's various automakers due to policy support and get a respite, in the birth of the car in the European continent, European automakers are still for the mother country's car market stimulus policy and shouting.
Epidemic Crisis
Europe, the second epicenter of the new crown epidemic after East Asia, has gradually won the battle against the epidemic over the past two months with strict grounding and work stoppage orders. But the economic costs of these measures have been enormous.
Passenger car sales in the European Union's 28 countries, including Britain, fell 45 percent year-on-year to just 567,000 units in March, according to data recently released by ACEA, the Association of European Automobile Manufacturers. According to Ernst & Young's estimates, passenger car sales across the EU will fall 70 percent year-on-year in April, when economic life is most severely impacted, a figure that also roughly matches China's 79 percent year-on-year decline in February, the worst month of the epidemic.
Currently, France's Council of Automobile Manufacturers (CCFA) and Britain's Society of Motor Manufacturers and Traders (SMMT) have released April passenger car sales figures for France and Britain, respectively. France's April passenger car sales were only 20,997 units, down 88.8 percent year-on-year, while Britain's April passenger car sales were only 4,321 units, down 97 percent year-on-year, back to the level of 1946 after World War II.
When the time came in May, all European countries except Britain and Russia had passed the inflection point of the epidemic. Germany, the fastest recovering of the major European countries, has allowed car dealership stores to reopen since April 27, while European carmakers such as Volkswagen, BMW and Daimler have been gradually resuming production on April 20 one by one.
The question now is how to incentivize consumers to buy cars again.
How to save the market
The answer is still the consumer subsidy for new car purchases.
This form of subsidy was used to save the European auto industry from the 2008 financial crisis under the names of "environmental subsidies" and "trade-in subsidies". At that time, the French government took the lead in encouraging consumers to trade-in their old cars for new ones, announcing that owners of new cars with more than 10 years of age will be rewarded with 1,000 euros for trading in their new, environmentally friendly cars with small emissions. Since then, 13 European Union countries, including the United Kingdom, Germany, Austria and Italy, have announced that they would follow suit. The British government and car companies in the United Kingdom at the time committed to more than 10 years of age for the replacement group to provide 1,000 pounds of subsidies.
And the financial strength of the most powerful Germany announced the elimination of more than 9 years of age of the old car for the new incentive of 2,500 euros, in less than half a year, Germany's applicants for the subsidy exceeded 1.2 million people. At that time, Germany's 2009 annual passenger car sales rose sharply by 23.3%, an increase of 720,000 units over 2008. A total of 1.93 million passenger cars were subsidized by the state.
With a successful precedent in 2009, Germany's auto industry has been frequently pressuring politicians since mid-April to restart a massive subsidy program for new car purchases, hoping to benefit all electric cars, plug-in hybrids and fuel cars that meet Euro 6 emissions standards.
While no automaker has publicly stated its stance on the subsidy, it is expected that a subsidy of more than 4,000 euros per car would be more realistic, with the government providing a pool of funding of at least 2 billion euros.
BMW chief executive Zipzer publicly put forward the term "innovation subsidy" (Innovation Bonus), aimed at accelerating the decarbonization transition by stimulating electric vehicles as well as advanced fuel vehicles: "We see a double opportunity in the subsidy for car purchases, first of all the policy can promote economic restart, and secondly, it can promote the development of the economy. policy can drive an economic reboot, and secondly it can also accelerate the energy transition of the automotive industry."
Ralf Brandst?tter, chief operating officer of the Volkswagen brand, also said the auto industry needs a broad subsidy incentive that should be in place by this summer. Volkswagen Group Chief Financial Officer Frank Witter also made it clear that the group is counting on government stimulus in announcing its first-quarter results.
A similar call came from Daimler. Mercedes-Benz's parent company's chief executive officer, Linus Kang, also said at the first-quarter earnings meeting that he wanted to push for stimulus as soon as possible, reminding consumers that indecision about policy could further depress sales figures. Daimler's 78 percent year-on-year decline in first-quarter EBITDA was also the least optimistic of the German trio.
Only from theoretical calculations, the effect of a timely auto market stimulus would be greater than that of the financial crisis a decade ago. The average age of 48 million passenger cars across Germany is now 9.6 years, compared with 8.5 years a decade ago, and 19 million of these motor vehicles even have Euro IV or Euro III emission standards.
The demands of the big three German carmakers were also supported by local politicians in the first instance. The three federal states of Bavaria, Lower Saxony and Baden-Württemberg are home to the headquarters of BMW, Volkswagen and Daimler, respectively. As the automotive industry is crucial to the local economy and employment, the governors of the three states have jointly asked the federal government to take action as soon as possible, and have even asked Berlin to lobby EU headquarters to introduce a pan-European car market stimulus.
But at least for now, with major European car-producing and selling countries such as France, Italy and Spain needing until after May 10 to gradually open their economies, the odds are that the Germans will act as a policy watchdog within the EU.
Difficulties abound
As expected is not always the case.
No Chinese 11 ministries launched a combination of policies, the car market stimulus policy is already very limited room for maneuver in European countries want to rely on a fresh eat all the sky is not so easy.
The car market stimulus policy was fiercely opposed in the first place.
The first point of contention was the definition of the range of subsidized models.
Daimler, a pioneer of the fuel-car era and a latecomer to the electric-car era, wanted to extend the subsidies from electric cars and Euro 6 standards to all fuel models. Michael Brecht, the president of Daimler's labor union, has publicly stated that he wants the subsidies to apply equally to all models, and Daimler's chief executive, Richard Conlinsohn, has said that "there is a need for simple, universal subsidies for the purchase of cars.
But the proposal is opposed by most environmentalists in Europe, where energy efficiency is a priority. If all models were subsidized, it would mean that previously subsidized electric cars would be priced out of the market, which would be detrimental to meeting the EU's 2050 carbon neutrality targets.
Germany has already raised its subsidies for electric cars from a maximum of 5,000 euros to 6,000 euros in February.
Daimler's proposal has also met resistance at the political level. While the states of Bavaria, where BMW is based, and Lower Saxony, where Volkswagen is based, both support expanding the subsidy to a wider range of models, the governor of Bavaria, which is Daimler's home state, is a member of the Green Party, an environmentalist party, which also opposes subsidies for fuel-efficient vehicles because of its political stance. Even at the federal level in Germany, German Economy Minister Altmaier said, "There will not be a subsidy for car purchases exactly as in 2009, we will only subsidize models with low carbon emissions." At the highest EU level, the European Commission has signaled its willingness to give nearly a third of its 250 billion euro revival fund to the auto industry, but only in the form of loans and other incentives to promote the energy transition rather than a direct sprinkling of money aimed directly at the consumer end.
A second point of contention is whether the auto industry needs special care.
While the auto industry is Europe's mainstay, contributing nearly 10 percent of economic output and 800,000 direct jobs in Germany alone. Bernd Osterloh, VW's union president, wrote directly in an internal e-mail, "We know that we are calling for the use of taxpayer money, but we also know that the money will be better allocated with this, whether on an economic or social or environmental level." VW Chief Executive Officer Dies also went on record on German television saying the best entry point to save the economy was the auto industry.
But it should not be forgotten that it is not just the automotive industry that is in dire need of a government bailout. Tourism, catering, medical supplies and civil aviation have all been hard hit by the epidemic. Among them, tourism, catering, civil aviation revenue fell more than 90%, and compared to the big automakers, small and micro-enterprise-based tourism and catering industry cash flow is difficult to support more than one month, the industry also created a wider range of employment opportunities.
Even in Germany, where the automotive industry is extremely important, the governor of North Rhine-Westphalia is inclined to tilt finances toward the IT industry to solve the structural problem of poor digital infrastructure that has been exposed by the long-term home office.
A third point of contention is how effective subsidized car purchases actually are.
Unlike the economic crisis that erupted from the financial sector a decade ago, this one has resulted in much wider unemployment, short-term working and a much wider break in corporate financial chains. In contrast to the financial crisis from the top down, the new crown crisis from the bottom up directly threatens the lives of ordinary people. Declining incomes due to unemployment or short-term working, fears of possible employer closures, and increased uncertainty about the future are the main factors hindering new car purchases. Several politicians, including those from the European Commission, believe that ensuring business survival at the macro level, rapidly reducing unemployment and introducing flexible financial instruments at the micro level is the key to reviving the car market, as opposed to thousands of euros in subsidies.
A typical example is South Korea's Hyundai, which seized the U.S. market through its "Certainty in Uncertain Times" slogan during the 2008 financial crisis, while General Motors declared bankruptcy at the same time. Hyundai allowed buyers to return vehicles if they lost their jobs or couldn't pay their loans.
Additionally, the policy of subsidizing car purchases in 2009 had a mixed follow-up. In 2010, after the subsidies expired, German passenger car sales fell another 24 percent, a figure even worse than in 2008, and to this day, annual passenger car sales in Germany have never reached the highs of 2009.
In a similarly saturated market for passenger cars in Europe, the subsidies would have released pent-up demand in advance and sapped purchasing power for years afterward, a policy that is in a sense similar to the European Central Bank's thirst-quenching negative interest rate policy. The question is whether German carmakers, which need to catch up with Tesla's electrification efforts, will be able to withstand another decade of sluggish demand.
Another side effect of the 2009 subsidies was that cheaper Hyundai and Fiat were the biggest beneficiaries of the subsidies that year, compared with the more expensive German luxury brands. The resulting wave of replacements also led to an influx of well-maintained vehicles into the used car market, causing prices to plummet.
Even though the subsidized purchase of ten years ago set the prerequisites for the Euro 4 standard, it has so far been difficult to reach a consensus on the environmental impact of the policy. A survey by Germany's environment ministry showed that the 1.7 million passenger cars traded in that year that met Euro 4 standards emitted one-fifth less than the old cars that were phased out, while in another independent survey commissioned by the OECD's OCED, it was shown that the subsidy actually dramatically stimulated demand for large-displacement models such as SUVs.
It's worth noting that, in fact, the reintroduction of subsidized car purchases also lacks a public mandate, at least in Germany. According to pollster Civey, 62 percent of the 170,000 respondents expressed a negative attitude toward the policy of stimulating the car market, and 39.8 percent of them said they would never support any form of government subsidy. Only 29.3% of the respondents had a positive attitude.
This article was written by the author of AutoZone, and does not represent the views of AutoZone.